The Illinois Attorney General has filed a lawsuit against a World Gym franchisee group, claiming that the company charged members for dues after its facilities closed.
The office of Attorney General Lisa Madigan filed the complaint on May 30 in Cook County (IL) Circuit Court. The suit specifically names World Gym-Willowbrook Inc. and its owners, James Mecha and Diane Vassolo, along with American Service Finance Corp., Highlands Ranch, CO, which does business as ASF International.
Madigan says that World Gym franchisees and ASF charged members at least $100,000 for dues and fees for several months after the Chicago-area World Gyms closed. Of the World Gyms in question, the Elgin, IL, facility closed in May 2011, the Norridge, IL, facility closed in June 2011 and the Plainfield, IL, facility closed in July 2011, according to the complaint. Members of those closed gyms were directed to other World Gyms located as far as 22 miles away in Montgomery and Des Plaines, IL, and were still billed for memberships, the attorney general’s office claims.
According to the attorney general’s office, when members refused to pay, World Gym-Willowbrook sent the accounts to First Credit Services Inc., a third-party debt collector.
The World Gym franchisees and their lawyer did not respond to calls by Club Industry for comments. However, included in the attorney general’s complaint is a letter dated Dec. 15, 2011, from Mecha’s attorney, Leigh Roadman, to Assistant Attorney General Vijay Raghavan. In the letter, Roadman addresses a conversation he had with Raghavan about a subpoena issued to Mecha by the Consumer Fraud Bureau on Nov. 14, 2011. Roadman writes that if Mecha were to appear in response to the subpoena, he would assert his Fifth Amendment privileges in response to questions put to him.
ASF International’s policy is to stop all member billing as soon as it finds out that a club has closed, says Tamara Valdez, the executive vice president of marketing for ASF International. If another facility is honoring the memberships, the company directs the members there and continues processing. If no facility is offered, all activity is stopped.
Some issues with this World Gym group began to surface last fall, Valdez says. ASF International then had a conference call in January with the attorney general’s office, which Valdez says was not receiving a response from the World Gym franchisees.
ASF International has been cooperating with the attorney general’s office, providing information about its billing practices, how it handled the club closures, member cancellations and refund requests, she says.
“After communication on all sides, we were left with the understanding that the gyms and the attorney general’s office would negotiate the complaints and find a solution,” Valdez wrote in an email to Club Industry. “Now, the issue has returned.”
Ten consumers filed complaints with the Attorney General Office from the more than 2,000 members affected by the gym closings, according to the filing.
Many members were happy with the new facilities, have been attending and continue to pay for their memberships, ASF says.